British Satellite Broadcasting - Regulatory Context

Regulatory Context

A new TV transmission system, Multiplexed Analogue Components (MAC), was originally developed for high definition TV but European TV manufacturers developed patented variants and successfully lobbied regulators such that it was adopted by the EU as the standard for all direct broadcast satellites.

This had the effect that the low cost non-European TV manufacturers would not only have to pay royalties to the EU manufacturers but would also not have direct access to the technology and hence would always be behind with new developments.

In the UK, the Independent Broadcasting Authority developed a variant D-MAC which had marginal audio channel improvements, and insisted on its use by the satellite service to be licensed by itself. On the continent of Europe, satellite TV manufacturers standardised on another variant, D2-MAC, which used less bandwidth and was compatible with the extensive existing European cable systems.

With the launch of BSB the IBA became a member of the secret "MAC Club" of European organisations which owned patents on MAC variants and had a royalty sharing agreement for all TV and set top boxes sold.

The IBA was not directed to be an "economic regulator", so the free market in lower power satellite bandwidth satellites (such as SES-ASTRA) leveraged the benefits of the existing lower cost PAL transmissions with pre-existing set-top box technology. The IBA was rendered helpless and Rupert Murdoch made a voluntary agreement to adhere to those Broadcasting Standards Commission rules relating to non-economic matters, such as the technology used.

Ironically the past-deadline encryption system in the DMAC silicon chip technology was one primary reason for BSB having to merge with Sky and hence the Far Eastern TV manufacturers had largely unfettered access to the market when MAC was dropped in favour of PAL. Sky launched with these free-to-air PAL receivers, adding the VideoCrypt technology when the DMAC system was dropped and Sky Sports and Sky Multichannels was launched.

BSB's shareholders and News International (Murdoch) all made huge profits on their investments, the 50:50 merged venture had an effective multi channel quasi monopoly on UK satellite pay TV.